Old Concerns Over Data Transfer to China Get New Attention

By JEFF GERTH

Published: December 7, 1998

WASHINGTON, Dec. 6—
When a Central Intelligence Agency scientist visited the Hughes Electronics Corporation in Los Angeles in 1995 to learn more about China's missile capabilities, he became concerned that the satellite manufacturer might have helped improve Chinese military capabilities.

The worries of the scientist, Ronald Pandolfi, were not warmly received back at C.I.A. headquarters, intelligence officials now say, and the agency killed his study, called a National Intelligence Estimate.

But today, the information gathered by Mr. Pandolfi is part of various criminal and Congressional investigations looking at the transfer of American space technology to China and, more broadly, at the intersection of commerce and national security in the Clinton Administration.

Officials disclosed over the weekend that the Senate Intelligence Committee had asked the Justice Department to determine whether the agency had obstructed justice by alerting Hughes to the Senate panel's recent interest in Mr. Pandolfi and the officials he saw at Hughes in 1995.

C.I.A. officials deny that the agency intended to hinder the Senate inquiry, and say they helped facilitate Mr. Pandolfi's questioning by investigators. An agency spokesman, Bill Harlow, said the agency would not talk about Mr. Pandolfi's experiences or the 1996 National Intelligence Estimate he wrote, because of the investigations. The classified intelligence estimate warned that the transfer of American satellite technology could contribute to China's ballistic missile capabilities, other officials said.

C.I.A. officials disagreed with some of Mr. Pandolfi's conclusions and decided that the estimate was not ''rigorous'' enough, one official said, so it was not published or distributed to other Government officials.

But Mr. Pandolfi's warnings may turn out to have been right after all. The Pentagon and the State Department have now looked at the same question that bothered Mr. Pandolfi three years ago: Did Hughes help to significantly improve China's military capabilities?

Experts on intelligence and missiles at the two departments have drafted reports with troubling conclusions, according to officials familiar with the drafts.

''The drafts I've read suggest some pretty serious problems,'' one Administration official said. The Pentagon report could be sent to Congress as early as this week, another official said.

Mr. Pandolfi could not be reached today for comment. An official at Hughes said no one was available today to comment on the inquiry. But the company, a unit of General Motors and major customer of the C.I.A., has denied any wrongdoing in the past and says it is cooperating with the investigations.

Last July, Steven D. Dorfman, the vice chairman of Hughes, told the Senate subcommittee on proliferation that, in the company's review of a 1995 explosion of a Chinese rocket carrying a Hughes satellite, ''no material technology was transmitted to the Chinese that would help them build missiles.''

Two months later, Mr. Pandolfi testified before a closed session of the Senate Intelligence Committee. His testimony remains secret. Officials say the agency brought Mr. Pandolfi to the committee's attention, though not immediately.

C.I.A. officials see nothing unusual about disagreements over complicated intelligence matters. But, other officials said, what the Senate committee has heard raises questions about whether the C.I.A. and other agencies or departments of the Clinton Administration have paid too much attention to helping companies like Hughes build commerce abroad, and not enough attention to national security.

The story of the intelligence analyst begins in January 1995 when a Chinese rocket carrying a Hughes satellite exploded soon after takeoff. Before long, a newspaper in Hong Kong controlled by the Chinese Government suggested that the accident had been caused by Hughes.

Hughes thought the Chinese were to blame, but some officials were reluctant to bluntly confront the Chinese for fear of offending an important customer, a former Hughes executive said.

It is not clear exactly what Hughes told the Chinese, but the satellite manufacturer agreed to help Chinese scientists and engineers figure out what went wrong in the January launching. Hughes sought and received permission from the Commerce Department before it undertook the accident review.

The expertise and technology needed to put a satellite into orbit are similar to what is needed to deliver weapons from a ballistic missile. China's civilian rocket and space program is run by the same Government-controlled companies that develop and sell ballistic missiles.

There were no Pentagon monitors present at Hughes's 1995 accident review because satellites licensed by the Commerce Department did not always require such a presence. Mr. Pandolfi was alarmed when he heard on his Los Angeles trip about what had transpired in the accident review, an associate recalled.

''What they told him they were sharing and how far the company had been willing to go, he thought it was questionable from the standpoint of national security,'' the associate said.

But the analyst's concerns never went very far after the agency killed the intelligence estimate he drafted in April 1996.

But this year it was revealed that a Federal grand jury was investigating whether Hughes and another American space company, Loral Space and Communications, had gone too far in assisting the Chinese after another rocket failure, this one in 1996, with a Loral satellite on board.

Soon, the grand jury and various Congressional committees became curious about the earlier accident review by Hughes. The Commerce Department acknowledged to Congress that the license for that review should have been approved by the State Department, which has authority over all defense services or equipment -- and which requires Pentagon monitors.

Mr. Dorfman told the Senate that, in hindsight, the Pentagon monitors ''should have been there,'' at the 1995 accident review. In 1995 the chairman of Hughes, C. Michael Armstrong, was leading the fight to persuade President Clinton to shift jurisdiction over satellites from the more restrictive State Department to Commerce.

The criminal inquiry is focusing, among other things, on whether Hughes knew or should have known it was required to get State Department approval before helping the Chinese in 1995.

After the news accounts earlier this year, Mr. Pandolfi spoke with Federal and Congressional investigators. C.I.A. officials say the agency helped arrange those interviews after some delay, one official said. When the intelligence committee wanted to further explore the issue with Hughes, the agency alerted the satellite maker, but, within 24 hours, had also informed the committee about its heads-up to Hughes, one official said.

The concern of Congress involves broad issues of national security. It was the Senate panel on proliferation that asked the Pentagon to assess the national security implications of the 1995 accident review. And the Senate intelligence committee, officials said, is looking at whether what happened to Mr. Pandolfi is part of a larger question: Has the Clinton Administration's strategic partnership with Beijing affected the way the intelligence community sees China?